Volume 2, Issue 6, June 2017
ISSN No: - 2456 2165
A Study on Profitability Ratio Analysis of Britannia
Biscuits Ltd
Prof. P.UMA ESWARI,
M.com., MBA., M.phil.,
Department of commerce
PRIST UNIVERSITY
Thanjavur - 613 403
Tamilnadu-INDIA.
Abstract :- The Financial Statement analysis is largely a
study of relationship among the various financial factors in
a business as disclosed by a single set of statements, and a
study of the trend of these factors as shown in a series of
statements. This project report covers all the aspects
relating to the Profitability ratios of Britannia industries
Ltd interpreted according to standards. Britannia was
incorporated in 1918 as Britannia Biscuits Co LTD in
Calcutta. In 1924, Pea Frean UK acquired a controlling
stake, which later passed on to the Associated Biscuits
International (ABI) and UK based company. The company
is engaged in the manufacture of biscuits, Rusks, cookies
and cakes. Britannia operates in a single segment, foods
including bakery products such as biscuits, bread, cakes,
Rusk, and dairy products. The company is headquarter in
Kolkata, India and employs 2,358 people Global Markets
Direct, the leading business information provider, presents
an in-depth business, strategic and financial analysis of
Britannia Industries Ltd.
Key words: Gross profit Ratio, Operating Ratio and Net
profit Ratio.
I. ISNTRODUCTION
Analysis and Interpretation of financial statements
refers to the process of determining the significant operating
and financial characteristics from the accounting data with a
view to getting an insight into the activities of an enterprise.
Financial Statement analysis is largely a study of
relationship among the various financial factors in a business
as disclosed by a single set of statements, and a study of the
trend of these factors as shown in a series of statements.
Financial statement analysis allows analysts to
identify trends by comparing ratios across multiple time
periods and statement types. These statements allow analysts
to measure liquidity, profitability, company-wide efficiency
and cash flow. The preparation of financial statements i.e.
IJISRT17JU90
International Journal of Innovative Science and Research Technology
S. VIJI,
M.com.,
Department of commerce
PRIST UNIVERSITY
Thanjavur - 613 403
Tamilnadu-INDIA.
Balance Sheet and Trading and Profit and Loss Account in the
module titled Financial Statements of Profit and Not for
Profit Organizations. After preparation of the financial
statements, one may be interested in analyzing the financial
statements with the help of different tools such as comparative
statement, common size statement, ratio analysis, trend
analysis, fund flow analysis, cash flow analysis, etc. In this
lesson you will learn about analyzing the financial statements
by using comparative statement, common size statement and
trend analysis.
This project report covers all the aspects relating to
the Profitability ratios of Britannia industries Ltd interpreted
according to standards. This project was done with the help of
secondary data as research in finance subjects is done on
performance and not potential. The project selected by me is
to do statement the financial ratio analysis. The main intention
was to group or regroup the various figures and information
appearing on the financial statement (either profitability
statement or balance sheet or both) to draw the fruitful
conclusions there from.
Profitability ratios are valuable as they depict how are you
utilizing and managing your resources.
II. OBJECTIVES OF THE STUDY
To identify the financial analysis of Britannia industries
Ltd.
The Gross profit ratio, Net profit ratio and other
profitability ratio position of the Company.
s
The financial ratio analysis and determining the financial
capability of the Company.
III. COMPANY PROFILE
Britannia was incorporated in 1918 as Britannia
Biscuits Co LTD in Calcutta. In 1924, Pea Frean UK acquired
a controlling stake, which later passed on to the Associated
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Volume 2, Issue 6, June 2017
Biscuits International (ABI) and UK based company. During
the 50s and 60s, Britannia expanded operations to Mumbai,
Delhi and Chennai. In 1989, J M Pillai, a Singapore based
NRI businessman along with the Group DANONE acquired
Asian operations of Nabisco, thus acquiring controlling stake
in Britannia. Later, Group DANONE and Nusli Wadia took
over Pillais holdings. Britannia Industries Limited is one of
the largest biscuit manufacturing companies in India. The
company is engaged in the manufacture of biscuits, Rusks,
cookies and cakes. Britannia operates in a single segment,
foods including bakery products such as biscuits, bread, cakes,
Rusk, and dairy products.
Britannia's plants are located in the 4 major metro cities
Kolkata, Mumbai, Delhi, and Chennai. A large part of
products are also outsourced from third party producers. Dairy
products are outsourced from three producers - Dynamic
Dairy based in Baramati, Maharashtra, and Modern Dairy at
Karnal in Haryana and Thacker Dairy Products at Howrah in
West Bengal.
IV. RESEARCH METHODOLOGY
Research Methodology is a way to systematically solve
the problems. It may be understood to study how research is
done scientifically. In this, we study various steps that are
generally adopted by the researcher in studying research
problems along with the logic behind them, to understand why
we are using particular method or technique so that the
research results are capable of being evaluated. During my
project work, I have used a lot of data to understand concept
of Ratio Analysis. The data collected was interpreted and then
used as information in project.
V . SOURCES OF DATA COLLECTION
Data for this project is collected through Secondary
sources. Secondary data is collected with the help of
following:
A. Annual report
Majority of information gathered from data exhibited
in the annual reports of the company. These includes annual
reports of the year 2011-12,2012-13,2013-14,2014-15 and
2015-16, the Theory relating to the various financial
reference books.
VI. RATIO ANALYSIS
Ratio analysis is an important technique, which is
widely used for interpreting financial statement. The technique
serves as a tool for assessing the current and long-term
financial soundness of a business. It is also used to analysis
various aspects of operating efficiency and level of
profitability. A German scholar used ratios for the first time in
1919.
IJISRT17JU90
International Journal of Innovative Science and Research Technology
ISSN No: - 2456 2165
VII. PROFITABILITY RATIO
Measures that indicate how well a firm is performing in
terms of its ability to generate profit and Formulae of some of
the common ratios are as follows:
Gross profit percentage: Total cost of sales in
a period x 100 Total sales revenue for that period.
Net income percentage: Net income for a period x
100 Total sales revenue for that period. Operating
profit percentage: Earnings before interest and taxes
(EBIT) in a period x 100 Total sales revenue in
the same period.
Return on Investment: Net income Total assets.
VIII. PROFITABILITY OPERATING SYSTEMS
The relevant literature on the role of profitability in
competition analyses and to show the benefits and drawbacks
of relying on profit measures as indicators of market power or
the abuse thereof in competition cases. This is particularly
relevant given that other jurisdictions have taken the approach
of investigating markets for competition problems when
profitability is found to be excessive, despite that this
approach is a controversial one. In the ongoing healthcare
market inquiry, this may be one possible point of departure,
given such precedents.
A. Concept of Profitability
Profit is the main objective behind the establishment
of an any business organization. It is the engine that drives the
business enterprise. Importance of profit to different parties
Weston and Brigham pointed To the financial management,
profit is the test of efficiency and a measure of control, to the
owners; a measure of the worth of their investment, to the
creditors, the margin of safety, to the government a measure of
taxable capacity and basis of legislative action; and the
country profit is an index of economic progress.
B. Accounting Profit
The excess of revenue over related costs applicable to
a transaction, a group of transactions or the transactions of an
operating period is profit. In accounting terminology The
profit of a business during given period is the excess of
income over expenditure for the period.
Gross Profit: The excess of total gross revenue over the
revenue expenditure is the gross profit.
Operating Profit: The excess of the total operating revenue
over the total cost of operation is the operating profit.
Net Profit: The excess of the total gross revenue over the total
cost of operation is the net profit. Net profit further divided
into three parts:
Net Profit before interest
Net Profit before tax
Net Profit before interest and tax
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ISSN No: - 2456 2165

RAW
CASH MATERIA
L

DEBTORS OPERATING CYCLE

WORK IN
& BILLS
PROGRESS
RECEIVAB
LES

FINISH
SALES
GOODS

IX. DATA AND INTERPRETATION
A. Gross Profit
Gross profit ratio is a profitability ratio that compares
the gross profit of a business to the net sales. This ratio
measures how profitable a company sells its inventory or
merchandise. In other words, the gross profit ratio is
Table 1
essentially the percentage markup on cost of goods sold. This
is the pure profit from the sale of inventory that can go to
paying operating expenses.
Gross Profit Ratio = Gross Profit X 100
Sales

Year 2011-12 2012-13 2013-14 2014-15 2015-16

G/P Ratio 11 5 8 6 5
Result Level Best Low Best Normal Low
Sources: secondary of data

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Volume 2, Issue 6, June 2017 International Journal of Innovative Science and Research Technology

ISSN No: - 2456 2165

Chart 1

G/P Ratio
11

8
6
5 5

2011-12 2012-13 2013-14 2014-15 2015-16

Norm: - Higher the ratio shows higher efficiency and vice versa.

The analysis of table 1 and chart 1: In 2011-12, the
Gross Profit Ratio was highly 11percentage and it went to 8%
low highly for the 2013-14. As there is no standard Ratio,
company has to determine its standard ratio based on past GP
ratios or GP ratios of other concern. The Ratio if we compare
it shows that
Failure in managing purchases, production, sales and
inventory
Lose control over direct costs of labour, fuel, freights etc.
Lower productivity and lower margin to meet other
expenses
X. OPERATING RATIO
It may be broadly classified into the following four stages viz.
1. Raw materials and stores storage stage.
2. Work-in-progress stage.
3. Finished goods inventory stage.
4. Receivables collection stage.
The operating cycle of the firm reveals the days
within which the inventory procured gets converted to sales or
revenue for the firm. This time period is of importance to the
firm as a lag here could significantly affect the profitability,
liquidity, credit terms, and the policies of the firm. All the
firms would like to reduce it to such extend that their cash
inflows are timely enough to meet their obligations and
support the operations.

The operating cycle begins with the acquisition of Operating Ratio = Cogs + Operating Expenses X 100
raw materials and ends with the collection of receivables
Sales
Table 2

Year 2011-12 2012-13 2013-14 2014-15 2015-16

O/P Ratio 12 6 9 8 6
Result Level Highly Best Highly Normal Best

Sources: secondary of data

Chart 2

O/P Ratio
2011-12 2012-13 2013-14 2014-15 2015-16
15%
29%
19%
22% 15%

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Volume 2, Issue 6, June 2017 International Journal of Innovative Science and Research Technology

ISSN No: - 2456 2165

XI. INTERPRETATION A. Net Profit Ratio

The above table 2 and chart 2 shows that in Britannia,
Operating ratio is decreasing year by year from 2012 to 2016.
In 2011-12, the Operating Ratio was 12% and it went to 9%
next year 2013-14. It indicates the cost of Expenses. As there
is no standard Ratio, company has to determine its standard
ratio based on past GP ratios or GP ratios of other concern.
The Ratio if we compare it shows that-
1) High efficiency in managing the Operations of the
concern like purchases made at lower prices,
optimum level of production, good inventory
management and good control of direct cost of
labour, fuel, freight etc.
2) A very good Margin available to meet non-operating
Expenses.
Table 3
Net profit represents the number of sales rupees
remaining after all operating expenses, interest, taxes and
preferred stock dividends have been deducted from a
companys total revenue. Net profit is also referred to as the
bottom line, net income, or net earnings. Net profit is found on
the last line of the income statement, which is why it is often
referred to as the bottom line. The formula for net profit is as
follows: Total revenue Total expenses = Net profit
NET PROFIT RATIO:
NET PROFIT RATIO = NPAT X 100
SALES

Year 2011-12 2012-13 2013-14 2014-15 2015-16

N/P Ratio 8 5 7 6 4
Result Level Best Low Best Normal Low

Sources: secondary of data

Chart 3

N/P Ratio
9
8
7
6
5
4
3
2
1
0
2011-12 2012-13 2013-14 2014-15 2015-16

The above table 3 and chart 3, shows that in based on past NP ratios or NP ratios of other concern. The
Britannia, the net profit is increasing year by year like it in Ratio if we compare it shows that:
2011-12 and 2013-14. It was decreasing from 2014-15 and
2015-16 was 6% and it went up 4%. It indicates the 1) Inefficiency in managing its activities like
relationship between net profit and sales. As there is no trading.production, financing and investment.
standard Ratio, company has to determine its standard ratio 2) unsatisfactory control over operating as well as non
operating costs

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ISSN No: - 2456 2165

3) Unusual losses like loss by fire, flood etc. improvement may also bring up its return on investment
4) Low increase in the net worth or the proprietors funds. and overall efficiency to the company.
5) Weak capacity of the concern to face bad economic
situation.

XII. OBSERVATION AND FINDINGS BIBLIOGRAPHY

In this project I calculate some ratios; these ratios are very
useful to interpret financial position of the company.
From that it is clear that the Britannia India Ltd is in
advanced stage. From the ratios calculated above
following conclusions can be drawn.
Following books were referred for carrying out the project: -
1. Financial Management by N.M. Venchalekar.
2. Financial Management by KHAN AND JAIN.

The gross profit earned by the Britannia Company is 3. Annual Reports of Britannia and Cadbury India Ltd.
declining every year. From 2012-13 to 2015-16, it is
fluctuating a lot which is due to failure in managing 4. Financial Management by Ainapure Ainapure
purchases, production, sales and inventory or loses
control over direct costs of labor, fuel, freights etc.
Operating ratio of Britannia going down from 2012-13 to Following websites were referred: -
2015-16, which is nothing but due to certain reasons like
low efficiency in managing the operations of the company 1. www.money.rediff.com
or low margin available to meet non-operating expenses. 2. www.cadburyindia.com
3. www.wikipedia.com
The net profit is nothing but profit earned by the company 4. www.cadbury.com
after deducting interest and taxes. The graph is showing
that in Britannia from the year 2012-13 and 2015-16, the
net profit is declining which is due to inefficiency in
managing its activities like trading, production, financing
and investment or unsatisfactory control over operating or
non operating costs.

XIII. SUGGESTIONS AND CONCLUSION

The in-depth analysis of key financial ratios in this project

helps in measuring the financial strength, liquidity
conditions and operating efficiency of the company. It
also provides valuable interpretation separately for each
ratio that helps organization implementing the findings
that would help the organization to increase its efficiency.
The position of the company in the interim period not
revealed by analysis, moreover they give no clue about
the future. Ratio analysis in view of its several limitations
should be considered only as a tool for analysis rather
than as an end itself.
From the analysis it is evident that the gross profit ratio is
good, whereas the operating ratio is around optimum level
to the industry standards. As a whole the liquidity position
of the company is good.

The company not very well used its fixed assets

efficiently company has reduce it in order to invest the
major portion in working capital or investment in current
assets. This is one of the reasons for profit fluctuation.
Thus finally the company must try to improve its profit
margins as they are below industry levels. This

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